08 Apr How Major Sports Teams Are Adapting to COVID-19
Sports as an industry critically rely on the revenue of advertisement, attendance, and television. Without these revenue streams, the football match you tune into regularly would not be the same. Many leagues and teams have taken action already to withstand the potential financial tsunami if seasons are suspended indefinitely. The first wave of adjustments that are unfolding is in forms of wage cuts for players. Few organizations have reached a concrete agreement as to what the potential cuts will look like.
The NBA, MLB, MLS, La Liga, and Premier League are still in negotiations of a large pay cut agreement for players. Italy’s Serie A is one of the first leagues to take action by 19 clubs voting to cut wages, with one team, Juventus voting against. Other leagues such as the Premier League are still navigating the losses ahead with a proposed 30% wage cut. The NBA is also considering a lower percentage at forgoing up to 25% of player’s salaries. These cuts will support teams in the short-term, however, could it hurt them in the long term. According to the latest issue of FC Business, players must provide consent before wages are set to cut. Without player consent, there can be a result of significant sanctions for leagues or teams. Considering this common clause, it is evident many sports industries have yet to reach agreements.
Although many agreements have not been reached, there are substantial efforts exerted by many teams and individuals. Real Madrid has agreed to cut between 10 to 20 percent of wages, contingent on if the 2019-2020 season resumes. Atlético Madrid announced that their players have consented to a 70% cut. Soccer stars Lionel Messi and Cristiano Ronaldo have waived almost $75 million in potential earnings. Top-level executives and staff have also been cut salaries in the MLS, NBA, NHL, and NASCAR.
The wage cuts, however, may not be enough to stop the colossal financial losses ahead. Teams are expected to see their revenue diminish rapidly if seasons are to end altogether. For example, if operations were not to resume for many leagues such as La Liga, Premier League, NBA, and more, leagues could lose a catastrophic $1 billion each. In wake of everything, some larger governing bodies are preparing to support sports organizations. The Premier League has already acted and advanced funds to the EFL and National League. FIFA is looking to dish out a $2.7 billion bailout package.
With all of these questions in these uncertain times, what does this mean for marketing? Without the presence of prime ad space for live broadcasted games and events revenue streams are extinguished for both brands and sports teams. In the U.S. alone, MediaRadar predicted broadcasters may lose $1 billion in advertising. Leagues have taken initiatives to engage fans through esports like iRacing, NBA2K20, and eLigaMX. This may be a short-term solution, but in the long-term, it could cause further losses.
Major sports teams and organizations have already been pushed to take an internal assessment measuring capabilities. If play returns soon across sports, we will see clear winners and losers for those who truly adapt and invest strategically.